BERLIN (Reuters) — After one of her first
encounters with Vladimir Putin in 2002, Angela Merkel joked to aides
that she had passed the "KGB test" by staring straight into his eyes
without averting her gaze.

Unlike presidents in Washington — George W. Bush claimed to have
gotten a glimpse of Putin's soul and Barack Obama promised to
"reset" relations with Russia — the German chancellor has never
harbored any illusions about the former Soviet agent, nor hopes that
she might change him.

It is this hard-nosed realism, born of Merkel's own experience
growing up in a Soviet garrison town in East Germany and reinforced
over a turbulent 14-year relationship with Putin, that has earned
her respect in the Kremlin and thrust her into the potentially risky
role of chief mediator in the Ukraine crisis.

When Merkel and Putin interact it is a clash of polar opposite world
views, aides to the chancellor say.

For Merkel, the physicist, the fall of the Berlin Wall in 1989 was a
godsend that launched her extraordinary career as a politician.

For Putin, who was living in the East German city of Dresden at the
time, it was a calamity that led within two short years to the
collapse of the Soviet Union — an event the Russian leader has
described as the biggest geopolitical catastrophe of the 20th
century.

But despite different outlooks, Merkel and Putin, born less than two
years apart, speak each other's language — literally and
figuratively.

Merkel, a fan of Tolstoy and Dostoyevsky, won a trip to Moscow as a
teenager for her mastery of the Russian language.

Putin's favorite subject in school was German, which he perfected
during his half decade as a KGB officer in Dresden, later sending
his daughters to the German school in Moscow.

On Merkel's first trip to Moscow as chancellor, the two leaders
conversed in their native tongues with translators present, but
found themselves interjecting repeatedly to correct the
interpreters. Aides say their conversations follow the same pattern
to this day.

"They have been working together for over a decade," said Alexander
Rahr, head of the German-Russian forum in Berlin. "It hasn't always
been smooth, but Putin knows Merkel better and respects her more
than the other leaders. He's never had a good relationship with
Obama."

"ALWAYS A BATTLE"

Since the overthrow of Ukraine's pro-Russian President Viktor
Yanukovich last month and Putin's decision to respond by tightening
Russia's grip on Crimea, the autonomous southern region of Ukraine,
the two leaders have talked on the phone roughly half a dozen times.

The conversations have not been easy, according to German sources.

Putin speaks a lot, sometimes endlessly. At times emotional and
angry, he tries to bully with a mix of genuine and calculated
outrage. The reserved Merkel waits patiently for the right time to
make her points.

"It is always exhausting, always a battle — intense," one senior
German official told Reuters.

In his 2013 biography of Merkel, Stefan Kornelius likened them to an
old married couple who know all of each other's tricks and can
anticipate what they are going to say next.

Merkel has described her conversations with Putin as challenging
tests for her own arguments. She feels that she cannot afford to
show any weakness.

In a conversation with the White House on Sunday that followed a
chat with Putin, she reportedly told Obama that the Russian leader
appeared to be "in another world", out of touch with reality.

In public, Merkel took care not to criticize Putin too loudly in the
first weeks of the Ukraine crisis, fearing it would backfire and
make the Russian leader harden his positions.

That changed last weekend when an unusually tough statement from her
office said she had accused Putin in a phone call of breaching
international law with his "unacceptable intervention" in Crimea.

On Thursday in Brussels, she said the EU would follow the United
States in introducing visa bans and asset freezes unless Putin moved
quickly towards a negotiated settlement on Ukraine.

The new tone was a reminder of the different worldviews in a
relationship that is based firmly on strategic interests rather than
friendship.

In 2005, Merkel defeated the Russian's close ally Gerhard Schroeder,
who had once referred to Putin as a "flawless democrat". Within
weeks of leaving office, Schroeder took a job as board chairman of
Nord Stream, the pipeline majority-owned by Russian gas monopoly
Gazprom.

On her first visit to Moscow as chancellor she made a point of
inviting human rights campaigners and opposition figures to a
reception at the German embassy, something Schroeder would never
have done.

A year later, when Merkel paid a visit to the
president's Black Sea residence in Crimea, Putin infuriated the
Germans by allowing his big black Labrador Koni to bound into the
room while cameras were running, ignoring warnings from protocol
that the chancellor has a fear of dogs.

More recently, the two clashed at an exhibition at the Hermitage
Museum in Saint Petersburg, which included German art seized by the
Soviets at the end of World War II. In a tense exchange at the
opening last June, Merkel demanded the works be returned to Germany,
only to be rebuffed by Putin.

Amid the sparring, Merkel has also sided with Putin at key moments,
bolstering her credibility in Moscow as an honest broker.

At a NATO summit in Bucharest in 2008, Merkel refused to bow to
pressure from Bush and other leaders to put Georgia and Ukraine on
track for membership in the western military alliance, a move the
German leader knew would infuriate Putin.

She also sided with Russia in abstaining from the 2011 U.N. vote
authorizing intervention in Libya and pleased Putin with her sharp
public criticism of the United States last year following reports
the National Security Agency had monitored her mobile phone.

"What is important for Putin is what Merkel thinks, what China
thinks and what the CIS countries think," a senior Russian security
source told Reuters, dismissing the largely symbolic measures
unveiled by Obama on Thursday as having zero impact on the Russian
leader.

Still, even members of Merkel's entourage believe that her ability
to sway Putin is limited. In the Ukraine crisis, they say, the
Russian leader's behavior has been driven primarily by domestic
considerations.

By embracing the role of mediator, Merkel is running a big risk. She
has urged Western partners to give Putin more time before punishing
Moscow with really punitive economic sanctions.

This stance that reflects German fears of the geopolitical
consequences of an isolated Russia as much as it does concern about
its business interests and energy ties. Germany gets over a third of
its oil and gas from Russia and more than 6,000 German firms are
active in the country.

But if Putin refuses to follow her advice on pursuing a negotiated
solution to the Ukraine crisis and consolidates Russian control of
Crimea in the days ahead, she runs the risk of looking soft and
naive.

"Merkel's chances of influencing Putin are overstated," said Stefan
Meister of the European Council on Foreign Relations.

"She has a relationship with him, there is a certain trust and he
listens to her, but there are limits to what impact that might
have," he said. "Putin has a very clear strategic goal in Crimea and
he is not going to be persuaded by Germany."